6 Simple Steps to Starting a Cannabis Business in California

When they say that the grass is greener on the other side, they just might be right in this case.

Whatever industry you’re currently operating in, it’s no doubt that there is something romantic about the idea of starting a cannabis business within the cannabis industry.

Cannabis seems to have endless medicinal benefits, not to mention the obvious recreational uses, and people from all walks of life are getting immersed in cannabis culture.

The potential of the cannabis industry is unfolding rapidly as more and more cannabis businesses emerge.

You want to get in on the action, but you’re not exactly sure where to start.

Starting a business in general is a daunting task, and when it comes to operating in the cannabis space, there are even more unknowns.

But don’t worry (be happy), because these 6 simple steps should set you up for a solid foundation when it comes to starting a cannabis business in California.

1. Have a unique idea

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This may seem like obvious advice, but this can actually be one of the hardest steps. So it’s best we get it out of the way first!

We think the best first step in starting a cannabis business is to have a super unique and creative idea when it comes to your product or service.

Need some inspiration coming up with that idea? Try asking yourself questions like this:

  • What’s a common problem that people face that your product/service can solve?

  • What’s a current issue in the cannabis industry?

  • How can I make cannabis more accessible?

  • What’s the cannabis industry missing right now?

  • How can I make cannabis more enjoyable?

  • Why do people buy cannabis products and services?

  • How can I make cannabis more normalized?

Try to think like the consumer when it comes to developing a product or service that people in your demographic will want to buy.
Don’t be shy to get advice from trusted friends and colleagues about your idea for some honest feedback.

This is also a good time to decide what kind of business you’ll be starting.
This will be essential to solving tax issues, ownership concerns, and state/federal obligations. We think that before you establish your cannabis business in the State of California, you should consult with a private attorney or tax advisor for advice about which business entity to will be best for you and your new business.

2. Know your demographic

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No pressure, but this step can quite literally make or break your business.

I know, I know. We all want our products or services to appeal to everyone in the world, right?

Well, unfortunately, even Apple and Starbucks had to do a lot of brand identity strengthening until their demographic, or target audience, became everyone.

This means you’ll need to start with a demographic that’s a little bit more specific.

This means you’ll probably have to do some research. Or let a marketing company do the work for you. Whatever floats your boat.

You can divide your demographics data into a number of different categories. Those categories are most commonly age, gender, race, religion, income group, etc…

Understanding the trends within different cultures will give you a better insight on the psychology behind why people buy what they buy and will ultimately give you that edge you need to connect with your audience.

When considering your demographic consider asking yourself the following questions:

  • What kind of people will be drawn to your product/service?

  • Is your product geared toward the medical or recreational market?

  • What kind of people are investing in cannabis products/services for medical reasons? What about for recreational reasons?

  • In what situations do you see your target audience using your product/service?

  • Is your demographic already buying? If not, what would drive them to start buying?

  • What websites and social media platforms does this demographic use?

  • How easily accessible is this demographic?

  • What is an appropriate price point for this demographic?

There are a number of ways to measure demographics, and a quick google will show you a number of databases that you can sort through to crunch already collected data.

But another great way to learn more about your demographic is to find out which companies you’ll be competing with early on. Watch closely and take notes about what they’re doing right and what they’re doing wrong. What’s working and what’s not. Use your competitors’ successes and failures to your advantage.

Make note of the kind of people who are interested in your competitors’ products/services. What are their genders? Their age range? Where do they live? Do you know what they’re interested in? What they care about? What problems they have?

The more you can learn about your demographic, the more specific you can be in your marketing and development efforts.

3. Stay up to date on compliance

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This third step is very unique to the cannabis industry, and unfortunately, one of the trickiest aspects of the industry to navigate.
Local, state, and even federal rules and regulations are constantly changing within the cannabis industry. This is why it’s so important to stay on top of how to stay compliant so that you can continue to operate your business.

There are many common compliance issues for cannabis business owners, so luckily, you can learn from others’ mistakes. But there are also many lesser common infractions that can just as easily put your business in jeopardy.

But when it comes to compliance, most cannabis businesses’ main focus lies within product lab testing, maintaining compliant packaging and labeling, and accurate audits and reporting.

A very common issue among cannabis business owners is staying on top of the ball when it comes to compliance while also maintaining a typical business model for any new business. It’s asking a lot of one person to do it all at once.

It’s a lot to juggle which is why we recommend setting up a meeting with a consulting company specifically for new cannabis businesses. Staying on top of compliance can easily strengthen or jeopardize your business more significantly than any other factor of business development.

As long as you’re staying up to date on all things compliance, you should be in great shape to develop the rest of your business.

4. Create a brand identity

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You have an idea, you’ve done your demographic research, and you’re all up-to-date when it comes to compliance. Now’s time for the fun part.

Creating your brand identity takes equal parts analytical and creative work.

You’ll likely have to work closely with a cannabis design team that understands your product/service, your vision/mission, and your intentions for the company.

Your design team will use psychology and design tactics to help you to cultivate a brand aesthetic and voice that will not only represent you well but connect well with your target demographic.

With the right design team, you can establish a color palette, a logo, and a brand voice. From there, you can build out and create a website, a blog, packaging, merchandise, and other ancillary products and services.

But along with all of this fun creative work, your company will probably need its own name to get started. But choosing a name isn’t as easy as it seems.

You should take into account previously trademarked businesses under the same name, how hard it would be to rank on popular search engines with that name, and what your website domain would look like with a name like that.

  • When developing a name for your company, consider asking yourself some of these questions:

  • Does this name represent my product/service well?

  • What’s the status of this name under the United States Patent and Trademark Office?

  • Will this name be easy to pronounce/spell/remember for my customers and clients?

  • Is there a website domain with this name in it available for purchase?

  • Will this name connect with my target demographic?

  • Does this name make sense for what the business is doing as a whole?

  • What do I want the story behind the name to make my customers and clients feel?

The Seed Group is one of the leading cannabis marketing companies in California and specializes in demographic research, design, and brand identity services.

5. Crack open that piggy bank

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The costs of running a cannabis business can be very steep. And since cannabis is still federally illegal, good luck finding any small business loans.

While some smaller credit unions and banks have started warming up to the idea of loaning smaller cash advances and loans to cannabis businesses, prepare to be primarily self-funded.

Investments such as applications and licensing fees, equipment, marketing, and startup costs are only some of what makes starting a cannabis business so expensive.

Not to mention the whole tax situation.

It’s in your best interest to talk to a consulting agency specifically for cannabis businesses to help you allocate your capital in the areas it matters most so that you don’t waste your money.

You should be able to invest your capital into your business in such a way that it comes back to you and more in the future. You shouldn’t have to feel shaky about your investments when it comes to your investments.

6. Reach out to local cannabis business coalitions

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You don’t have to go it alone!

The Sacramento Cannabis Industry Association (SCIA) was created to unite the cannabis industry in Sacramento to speak with one voice at a local level.

Based out of the capital of California, joining this coalition and meeting its members personally can help you to be heard, be represented, and be protected as a cannabis business in California.

Their mission is to provide a single voice for small cannabis business owners, as well as advancing and protecting local jobs created and supported by the cannabis industry. They are also committed to educating the public on the benefits of the cannabis industry in their own communities and promoting equity and inclusion with businesses small and large that share the united vision of protecting and growing jobs in Sacramento.

This is the perfect association to get in touch with especially if you’re a new up-and-coming cannabis business in California. They provide important resources, internship programs, and are currently spearheading a project all about giving back called Cannabis Cares.

Get in touch with SCIA today to be a part of something bigger than your business and to support and get support from other leaders within the industry.

Even if your business isn’t based out of Sacramento, this coalition is still a phenomenal resource for any cannabis business owners throughout California.

Starting a cannabis business isn’t easy. If it was, everyone would be doing it!

Luckily, the cannabis industry is unique to other industries in so many ways. It’s not as cutthroat and competitive as other spaces because we all support one another.

We provide resources and support for new emerging businesses because we were all once there too, and not too long ago. We understand the challenges and rewards like the back of our hands, and we are always happy to help out new leaders within the industry.

The industry is still so new that we’re all figuring it out together, which is why you get that sense of community within the industry.

Which of these steps do you think would be the most challenging to tackle? Let us know in the comments section and we’ll let you know if we have advice for you.

Want to start your own cannabis business? Get in touch with the Seed Group today for any and all consulting/marketing/advertising services within the cannabis industry.

We wanted to pay a special thank you to Capitol Compliance Management for uniting the cannabis industry and making easy for new cannabis business owners to get in on the fun!